Cost Efficient Dispute Resolution

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Hirtenstein v Il Sole Limited

[2014] EWHC 2711 (Comm)

Careless, partial and not credible

The Facts

Again, this is a case where the facts are not likely to be hugely relevant to readers; it concerned a contract for the purchase of a yacht, and professional advice and representation by solicitors in relation to that purchase. Ultimately the claimant’s succeeded on establishing that there had been a breach of contract by the solicitors, but Legatt J found there had been no loss as a result, and so the Claimant was only entitled to nominal damages; a pyrrhic victory.

What is of more interest is the judge’s (pretty savage) attack on one of the experts instructed, a Mr Smith, who was instructed to value the cost of the repairs claimed by the claimant. In summary, the judge noted the following:

1. Mr Smith, assessed the cost of restoring the yacht at about US$2.4m. In order to do so, Mr Smith was provided with a spreadsheet listing all relevant expenditure on the yacht, which came in at about US$2.9m. The author of that spreadsheet was not identified by Mr Smith in his report. The author had allocated the expenditure in columns between “repairs,” “routine maintenance,” “upgrades” and a final category headed “questionable”. Mr Smith said that his instructions were to analyse the costs and to allocate them, including those marked as “questionable”, to the correct category. In fact, Mr Smith’s categorisation evidently left a great deal to be desired. He thought none of the “questionable” were upgrades and thus outside the claimant’s claim for the cost of repairs; nor did he classify as an irrecoverable upgrade any item which had been provisionally categorised as a repair or as routine maintenance. In other words, wherever he had to exercise his expertise, Mr Smith invariably exercised it in the claimant’s favour and maximised the claim.

2. The judge found that particularly troubling because it was obvious when going through the schedule that numerous items were not “repairs” at all, and included items such as attorney’s fees (which Mr Smith was completely unable to explain when they were put to him) and well as what the judge described as “a vast array of fittings and accoutrements, computer equipment and office supplies etc. which are palpably unjustifiable” as part of the claim.

3. To make matters worse, the judge found three pages of duplication between Mr Smith’s “upgrades” and his “repairs” category. When asked about this, Mr Smith said that his error was to have included the sums in the schedule of upgrades – in other words, the duplication should come out of the category the claimant could not recover. The judge evidently found this surprising, given that some of the items categorised as “repairs” included bedding and wine glasses.

4. The judge described it as “another unsatisfactory feature of Mr Smith’s evidence” that he attached to his supplemental report an appendix itemising further expenditure which he was “completely unable to explain”, despite the judge specifically giving him an opportunity to do so, something which lead the judge to conclude that, “there is no explanation which exonerates Mr Smith of incompetence. On his showing in this case I do not consider that he is a fit person to act as an expert witness.”

Perhaps unsurprisingly, Mr Smith’s evidence was described as “careless” and something to which the judge could, “attach no credence at all … the figures put forward by the claimants [have just been] rubber-stamped by Mr Smith [as] the alleged cost of repairs.”

Comment

Quite simply, a case study in how not to do it. The modern tendency now is for judges to “name and shame” inadequate witnesses and Mr Smith has evidently borne the brunt of that here. It is difficult however to sympathise with an expert who produces a report like this – the judge’s description of Mr Smith engaging in a partisan, unanalyzed signing off of the claimant’s claimed figures under the aegis of an expert report seem, unfortunately all too fair.

A number of practice points however arise:

1. Obviously be objective and independent. That was Mr Smith’s basic failing from which all the others flowed;

2. Read the papers provided; Mr Smith could at least have been careful and removed obvious howlers, such as the duplication and the inclusion of things which no judge was ever going to describe as “upgrades.” It is no good that the client wants things left in the claim. Your first duty is to report to the tribunal, not please your client. Lawyers can (and unfortunately all too often have to) say to a client that they think a particular point is a bad one, but, in effect, if the client wants to run it, then on their head be it. Independent experts do not have that luxury. Lawyers are supposed to put their client’s best foot forward and pitch the case as high as they can. You do not have that right, and once the report is released there will be no real opportunity to row back from it later. The time to face off with your client over the claims you consider unsustainable is before you serve the report, not afterwards.

3. Identify the provenance of the documents you are using. This is basic good practice; it shows you are transparent and “straight”, which is a necessary (albeit not sufficient) requirement of being a good expert;

If you make a mistake, and the judge gives you an opportunity to correct it, then take it, no matter how unpleasant grasping the nettle feels at the time; the alternative, which is to let the opportunity go unanswered, is simply far worse.

Given the unknown provenance of the mystery schedule in the report which Mr Smith, then when given a specific opportunity Mr Smith’s best (or perhaps least worst) course would have been to say, very simply; it is an error, it should not have been there, and to provide the court with revised calculations excising it from the report. Better to make a clean breast of it – everyone makes mistakes, and the appearance of ducking a difficult question will not assist your credibility.